Table of Contents

Leaps Trader Commentary

Holding Our Breath

by Jim Brown

By the time you read this the Saudi Oil Conference should be in full swing.
Oil traders are holding their breath to see which way to trade on Monday. The
price of crude has been stagnant in a range around $135 for the last two weeks
as the tension built ahead of the meeting. Nobody has a clue what the meeting
holds since this is the first of its kind. Anything is possible and I would bet
that oil prices are going to be a long way from $135 by next weekend. The only
and most important
question is which side of $135?

The weekly oil inventory report showed another drop in crude stretching the
string to five consecutive weeks and a loss of 25 million barrels. Gasoline
inventories fell as well as refiners cut back on refining the high priced oil
from the prior week. Gasoline imports also declined. Crude inventories are now
14.2% below year-ago levels. All of this is just smoke and has no relevance on
oil prices this week as traders await Jeddah.

Weekly Oil Inventory Table

The stage is set and Saudi officials are making what seems like hourly
statements to the press. They leaked the news they were going to increase
production again by 200,000 bpd early last week. On Friday they confirmed it in
the press. They also reiterated they were spending $90 billion to boost
production to 12.5 mbpd by the end of 2009. There are many skeptics on that
point and doubts abound but that is a year away.

Bloomberg said Saudi pumped 9.134 mbpd in May according to OPEC. Bloomberg said
their output was 9.25 mbpd. Last Month Saudi said they were going to start
pumping an additional 300,000 bpd within a month. Now they have confirmed they
will add another 200,000 bpd on July 1st. In theory and using the Bloomberg 9.25
mbpd as a starting point that puts them at 9.75 mbpd and 11% of total daily
demand. It also came to light last week that the 200,000 bpd increase to be
announced at the meeting
is only temporary for the month of July and that was
not met with cheers. It only heightened the rumors that Saudi is close to its
peak production.

The current rumor is that Saudi will announce an increase of 500,000 bpd at the
meeting rather than the already admitted 200,000 bpd announcement. This rumor
caused prices to weaken on Friday after the Israel/Iran spike back to $137.
Personally I think the rumor mill and the various translation problems have
created this out of thin air. The combination of the 300,000 announcement last
month and the 200,000 announcement this weekend is 500,000 and I could easily
see how being overheard
saying something like "We are going to increase
production by 500,000 bpd" could be translated or construed by headline hunting
journalists as an additional 500,000 when it is not.

The EIA is no helping with the rumors. They calculated that 2008 world
production would average 86.54 mbpd and consumption total 86.38 mbpd. Since
consumption varies greatly by season that is an overall average. They claim
global production even with the 500,000 already announced by Saudi would still
fall short by 750,000 to 860,000 bpd during the peak season. They feel that
another 750,000 bpd is needed to cool off speculation in oil prices and meet the
peak demand.

Saudi responded to those comments by reiterating they were currently spending
$90 billion to improve production to 12.5 mbpd in 2009. The two remaining
projects that will contribute to that goal are the 500,000 bpd Khursaniyah
field, originally slated to come online last December but has been experiencing
continued delays. The last and even more complicated 1.2 mbpd Khurais field
should be online by mid-2009 according to Saudi. Literally nobody believe that
claim but again, that is
a year from now.

The only reason I spend so much time talking about Saudi is because they are the
only OPEC country with any meaningful excess capacity either real or imagined.
The key point to this entire exercise is how much oil can they really produce?
If they can pull off 9.75 mbpd it would help the overall problem but remember
most of that is low quality crude already in a surplus.

The world is holding their breath hoping this weekend meeting will somehow
magically fix the high prices on crude oil. Short of a major new production
announcement I don't see that as happening. First of all OPEC members are not
going to divulge any classified data and all their reserves and production data
is classified. Unless that is suddenly going to change this is likely going to
turn into a Saudi lecture and panel discussion and prices will be free to rise
again on Monday once
traders decide there is not a million barrels per day
suddenly going to appear out of OPEC.

Saudi also said they were going to double their international refining capacity
by 2012 to 6 mbpd. Again, old news. Their last two announced refinery projects
have yet to be started. Announcements are cheap and refineries are expensive.

Attending the meeting are 35 government officials like Samuel Bodman, U.S.
Energy Secretary. Also 25 executives from major oil companies, officials from
OPEC, the IEA, EU and the IMF. Even Venezuela did an about face on Friday and
said they would attend. They were initially boycotting the meeting as
unnecessary and claiming oil prices were still too low.

Other big news was the report in the New York Times on Friday that Israel had
staged a maneuver over the Mediterranean and Greece that had all the appearances
of preparations for an attack on Iran's nuclear facilities. The mock raid
involved more than 100 Israeli F-15 and F-16 warplanes along with aerial
refueling tankers, helicopters for pilot rescue, radar planes, etc. The
warplanes flew more than 1400 kilometers, about the distance from Israel to
Iran's nuclear enrichment facility
in Natanz. This major exercise was obviously
designed to demonstrate their capability of striking Iran as they have promised
if Iran continues uranium enrichment. The U.S. confirmed the maneuvers and the
potential of an attack on Iran. This was clearly designed to send a message to
Iran and to the world that Israel was not making idle threats to end Iran's
nuclear project. Israel destroyed Iraq's reactor facility in 1981 and a nuclear
site in Syria several months ago.

Shell declared force majeure on 225,000 bpd of June and July production from
Nigeria after the rebel attack on Thursday. That is a huge amount of light crude
off the market for the next six weeks. A Chevron pumping station in Nigeria was
attacked on Thursday night but there was no word on production declines. Chevron
was also in the news as talks with workers in Nigeria fell apart and a strike is
expected. A strike would impact Chevron's daily output of 350,000 bpd in
Nigeria.

Transocean (RIG) said it won a contract extension for the semisubmersible vessel
GSF Development Driller II and the extension would begin in November. The
contract would produce $1.6 billion in revenue for that one ship. It is only 1
of 35 highly specific drill ships Transocean operates. Eighteen are able to
drill in 7500 ft of water or more. They are truly minting money but the stock
has been dormant after the GSF merger. We were stopped out of a RIG play several
weeks ago. It may
be time to roll the dice again.

I added three stocks to the watch list that are heavily invested in the
Haynesville Shale formation in Louisiana. This is a new play in old fields. The
shale is below 10,000 feet and most of the oil deposits were found much higher
many years ago. With the new technology for horizontal drilling in shale this is
the hot new/old discovery. As I mentioned in the lead commentary for GDP in the
watch list CHK paid $178 million to Goodrich for a 50% working interest in some
Haynesville Shale
acreage. As I read further CHK said the Haynesville Shale
could end up being the biggest asset they own and produce more gas than any
other CHK property. That is a huge statement given CHK's massive footprint in
places like the Barnett Shale in the DFW area. Encana (ECA) is the largest gas
producer in North America and they said the Haynesville Shale could be the
biggest gas field in North America. Since the play is very new most people have
never heard of it. As the news gets out
I believe these three gas plays will
explode. There have only been 30 units formed to date in the Haynesville because
it is so new. A unit is 640 acres (1 square mile). That means only 30 square
miles have been plotted for drilling but the play itself is huge. Reportedly
landmen are going door to door trying to acquire acreage for lease. They are
making announcements at church services and holding neighborhood meetings
wherever possible. The city of Shreveport took a trip to the Dallas/Fort
Worth
area to see how the massive influx of drilling rigs was being handled as the
Barnett Shale is being developed. They are drawing up plans for drilling on
public parks, roadsides, etc. It is a land rush or maybe I should say gas rush
all over again. The Barnett shale covers 16-21 counties in Texas and the
Haynesville Shale is said to be larger than the Barnett. The discovery was just
announced in March.

Don't forget the Association for the Study of Peak Oil (ASPO) is holding their
annual conference in Sacramento on Sept 21-23rd. This is a full 2.5 days of
intensive, as in 8:AM to 9:PM information overload from dozens of experts from
around the world on the status of Peak Oil. The cost is minimal at $325 because
they are a non-profit and make no money on the event. Follow the link below to
register and join me there. We can discuss each presentation and plan trades for
the coming year.
Put my name in the "how did you hear" box so they can group us
together for the meetings. Go here to register:
http://www.aspo-usa.org/aspousa4/

Jim Brown

August Crude Futures Chart - Daily

July Natural Gas Futures Chart - Daily

July Gasoline Futures Chart - RBOB Daily

Changes in Portfolio

New Energy Plays

See watch list

New Non-Energy Plays

TRA

$54.16

Terra Inds

Dropped Plays

None

New Watch List Plays Triggered

FTK

$21.83

Flotek

ENER

$76.64

+8.14

Energy Conversion Devices

SGR

$63.83

Shaw Group

Portfolio Listing & Top Picks

***********
Top Picks
***********

If you are looking to add another position these are my top picks for this week.
The target prices listed would be the ideal entry points for these stocks today.
There is no assurance any stock will ever return to these support levels and you
will need to make your own decision about an entry point above these levels. I
believe these stocks have the best potential this week. The list will change
from week to week based on technicals, fundamentals, crude prices and market
action. The
list is not sorted in any particular order.

New Plays

Most Recent Plays

TRA - $54.16 Terra Inds

That was really frustrating. The options chain last week showed the $55 LEAP at
about $8.50 but the $60 LEAP we were targeting was showing $13.50. The majority
of the option chain was showing the lower prices. I ass-u-me-d that the $60
strike was the wrong price and the other prices were correct. Bad assumption! It
turned out that the $60 strike was the only accurate one. On Monday morning all
the prices adjusted up to the much higher price. This was obviously a case where
the market
maker was not keeping his chains updated unless somebody actually
tried to buy one. On Monday evening I sent an email to abort the entry since it
never hit our $8 target.

I really want to be in Terra and after the early week bounce it declined only
slightly and actually moved higher on Friday. I am recommending we bite the
bullet and take the entry here. We got the breakout over $50 and it could run
from here. If you jumped in last Monday you are way ahead of the game.

Company Info:

Terra Industries Inc. (Terra) is a producer and marketer of nitrogen products,
serving agricultural and industrial markets. The Companys business is organized
into two segments: Nitrogen Products and Methanol. The Nitrogen Products
business produces and distributes ammonia, urea, urea ammonium nitrate
solutions, ammonium nitrate and other nitrogen products to agricultural and
industrial users. The Methanol business manufactures methanol, which is
principally used as a raw material
in the production of a variety of chemical
derivatives, and in the production of methyl tertiary butyl ether (MTBE). Terra
owns a 75.3% interest in Terra Nitrogen Company, L.P. (TNCLP), which, through
its subsidiary, Terra Nitrogen, Limited Partnership, operates Terras
manufacturing facility at Verdigris, Oklahoma. The Company is the sole general
partner and the majority limited partner of TNCLP. On September 14, 2007, the
Company formed GrowHow UK Limited, a joint venture with Kemira
GrowHow Oyj.

FTK found some traction and ran all the way to $23.14 before Friday's market
action caused some profit taking and a downgrade from a no name firm.

Company Info:

Flotek Industries, Inc. is a global supplier of drilling and production related
products and services to the energy and mining industries. The Company's core
focus is oilfield specialty chemicals and logistics, downhole drilling tools and
downhole production tools. Flotek offers its products primarily through its
sales organizations, as well as through independent distributors and agents. The
customers for its products and services include oil and natural gas companies,
independent
oil and natural gas companies, pressure pumping service companies
and state-owned national oil companies. Five customers accounted for
approximately 34% of its consolidated revenue during the year ended December 31,
2007. The Company's reportable segments are Chemical and Logistics, Drilling
Products and Artificial Lift. All three segments market products domestically
and internationally.

Breakout trigger: $21.00 Hit 6/17

Position: 2010 $25 LEAP Call YVB-AE @ $5.20

******************

ENER - $76.64 +8.14 Energy Conversion Devices

What a breakout! It appears that rising wedge pattern and their new stock sale
powered ENER to a $10 gain during the week with only a minor decline on Friday.
The spike came on good news out of the Intersolar 2008 conference in Munich.

Company Info:

Energy Conversion Devices, Inc. manufactures and sells thin-film solar laminates
that convert sunlight to energy using proprietary technology. Distributed
globally under the UNI-SOLAR brand, the company's products are ideally suited
for cost-effective solutions for roofing applications because they are
lightweight, durable, flexible, can be integrated directly with building
materials, and generate more energy in real-world conditions. ECD also pioneers
other alternative technologies,
including a new type of nonvolatile digital
memory technology that is significantly faster and less expensive, ideal for use
in a variety of applications, including cell phones, digital cameras and
personal computers.

Breakout trigger: $68.50 hit 6/16

Position: 2010 $80 LEAP Call KYU-AP @ 23.10

********************

SGR - $63.83 Shaw Group

Shaw moved up to edge over $66 and trigger our entry only to fall back to
initial support at $63 on Friday. No harm and the trend is still intact.

Company info:

The Shaw Group Inc. (Shaw) is a diverse engineering, technology, construction,
fabrication, environmental and industrial services company. Shaw provides its
services to a diverse customer base that includes multinational oil companies
and industrial corporations, regulated utilities, independent and merchant power
producers, government agencies and other equipment manufacturers. The Company
delivers its services from more than 150 locations, including 22 international
locations. On
January 31, 2007, Shaw acquired all of the stock of Mid-States
Pipe Fabrication, Inc. (MSPF). On June 29, 2007, the Company acquired all of the
stock of EzeFlow (NJ) Inc., a manufacturer of pipe fittings for the power and
process industries. The Company has six business segments: Fossil & Nuclear;
Energy and Chemicals (E&C); Environmental and Infrastructure (E&I); Maintenance;
Fabrication and Manufacturing (F&M), and Investment in Westinghouse.

Breakout trigger: $66

Buy 2010 $75 LEAP Call YCW-AO

Play Updates

Existing Plays

BTU $80.31 +2.72 - Peabody Energy

BTU broke out to $86 on Thursday and gave back a couple on Friday. There was no
specific news and the weakness was sector wide.

Breakout target: $81 Hit 6/09

Position: 2010 $90 LEAP Call LLW-AR @ $19.92

*******************

BP $67.35 -1.05 - BP PLC

The battle with Russian interests continued for another week but a senior
Russian official said a breakthrough might be imminent. On the drilling side BP
extended a rig contract with Transocean for $1.2 billion. BP also won a $268
million contract with the Pentagon.

See the June-8th newsletter for news about Russia.

Recent progress announcements on the Thunder Horse platform in the Gulf
suggested that BP was going to finally start producing. BP is on track to begin
producing 250,000 bpd of oil and 200 million cubic feet of gas per day from
Thunder Horse. The platform covers the area of three football fields and sleeps
185 workers. The gas-powered generator could power 80,000 homes. The project
cost so far has been $3.5 billion. It will collect oil from 25 wells. I am
hoping the Thunder Horse project
will offset any further news from Russia.

Breakdown trigger: $68. Hit June 4th.

Position: 2010 $70 LEAP Call WAO-AN @ $7.30

*****************

PDE $45.74 -.06 Pride International

A new 4-week high on Friday morning and ended the day with a gain. No
complaints.

Zacks recently reiterated a buy rating on PDE on Friday based on their $9.4
billion backlog and their emergence as a pure play deepwater driller. They have
sold off their non-core assets to leverage the deepwater play. The market is
still valuing them as a shallow water jackup play and they are no longer in that
sector. They are a strong takeover target given their small size and sector.

Position: Jan 2009 $50 Call PDE-AJ @ $3.70

I went with a Jan call instead of a LEAP because an acquisition would limit LEAP
appreciation. I wanted to be close to the current price with a cheap option.

*******************

FWLT $72.90 -.67 Foster Wheeler

FWLT has been nothing buy volatile of late with a rebound from $70 to $76 and a
decline back to $72 just this week. No specific news.

US Global Investors said FWLT was one of two companies you must have.

Breakout trigger: $71 Hit 5/13

Position: 2010 $80 LEAP Call LWM-AP @ $16.80

*****************

CRR $57.53 +1.82 - Carbo Ceramics

No news but the trend is still higher. Resistance at $58 appears likely to crack
as long as the market does not kill the momentum. CRR is a major take over
target.

Breakout trigger: $48 Hit 5/12

Position: Dec $50 Call CRR-LJ @ $5.80

******************

JEC $87.35 -2.66 Jacobs Engineering

No news but JEC dropped -2.56 on Friday to erase our gain for the week. I
suspect it was market related rather than stock specific.

Breakout trigger: $90 Hit May 5th

Position: 2010 $100 LEAP Call WEU-AT @ $16

***************

PBR $65.27 -2.67 Petrobras

No specific news for PBR and the loss but the Latin American markets were all
negative for the week on inflation concerns. How a company that is announcing a
new discovery nearly every week can decline in a peak oil environment is
unknown.

Prior commentary:

Petrobras reportedly made another light oil discovery offshore in block BM-S-9.
This is an ultra-deep field like the rest and reportedly it is a large
discovery. The government officials continue to get in trouble for spilling
confidential data before Petrobras does and that happened again last week.
Petrobras said the Tupi field will be operational by 2010 with 100,000 bpd and
will be producing 500,000 bpd by 2020. The first actual production test is set
for Q1-2009. Lifting costs
are expected to be $8.20 per barrel. Tupi reserves
are expected to be between 5-8 billion barrels. They have only drilled two wells
at Tupi and the first one took 14 months and $240 million. Now they are drilling
wells in 2-3 months at $60-$80 million each. Petrobras is going out for bids on
the construction of 28 new drilling rigs. They will be Brazilian made and
delivered between 2013-2017.

Every dip is a buying opportunity.

Breakout trigger: $125.50 hit 4/28

Position: 2010 $150 LEAP Call YMO-AV @ $22.10

********************

NE $63.97 -1.22 - Noble Corp

No specific news other than the announcement of July 24th as their earnings day.
NE closed -$5 off its Thursday high but right on support at $64.

Noble recently won a $4 billion contract to drill for Petrobras off the coast of
Brazil. This is a monster payday and just one area of exploration for Noble.

Breakdown trigger $56.00 hit 4/29

Position: 2010 $70 LEAP Call YVJ-AN @ $8.10

******************

NOV $84.49 +1.33 - National Oilwell Varco

NOV continues to consolidate between $80-$86 as we await the news from Saudi
Arabia. On the home front any approval to drill off our coasts would be very
bullish for NOV. No specific news.

Breakdown trigger: $67 Hit 4/30

Position: NOV $80 Call NOV-KP @ $5.40

***************

FLS $133.33 -1.43 - Flowserve

Flowserve is having trouble breaking the $140 level but hopefully any quarter
end window dressing will favor FLS with some cash. I don't want to give back our
gains so I raised the stop to $128.

A reminder: I dropped the AAPL and RIMM positions from the commentary after last
week. They were both at max profit and were expected to stay that way until the
January LEAP expiration. There was no reason to continue taking up space with
them each week. I did not close the position but simply choose not to
continually report on a position that has no chance of changing for the next six
months.

Leaps Trader Watch List

I hesitate to add new plays when the potential is great that prices will fall
over the next couple weeks if the Saudi meeting is successful. However, we
should use that as an entry point for new positions.

Dropped Entries

FLR

Fluor

New Watch List Entries

GDP

Goodrich

HK

Petrohawk

CHK

Chesapeake Energy

Current Watch List

COP - ConocoPhillips

I raised the trigger again to $90 since that appears to be where it wants to
find support.

Company Info:

ConocoPhillips is an international, integrated energy company. It has six
operating segments. Exploration and Production segment explores for, produces
and markets crude oil, natural gas and natural gas liquids. Midstream segment
gathers, processes and markets natural gas, and fractionates and markets natural
gas liquids, primarily in the United States and Trinidad. Refining and Marketing
segment purchases, refines, markets and transports crude oil and petroleum
products. LUKOIL Investment
segment consists of its equity investment in the
ordinary shares of OAO LUKOIL. The Chemicals segment manufactures and markets
petrochemicals and plastics on a worldwide basis. Emerging Businesses segment
includes the development of new technologies and businesses outside the
Companys normal scope of operations. In October 2007, American Electric Power
Company, Inc. sold its 50% interest in the Sweeny Cogeneration plant in Texas to
ConocoPhillips.

Breakdown trigger: $90

BUY 2010 $100 LEAP Call YRO-AT

*********************

SD - Sandridge Energy

I wanted to buy a breakout here but the LEAPS are too expensive and SD is too
extended.

CEO Tom Ward, co-founder of Chesapeake with Aubry McClendon bought 230,000 of
his own shares at $50 in recent weeks. This kind of confidence gave Sandridge a
$5 bounce to a new high. SD announced the prior week that Williams had acquired
certain assets for $285 million giving Sandridge additional cash for growth.
This company appears to be in high growth mode and I want to own it on a
pullback.

Company info:

SandRidge Energy, Inc. (SandRidge) is an independent natural gas and oil company
with its principal focus on exploration, development and production activities.
The Company also owns and operates drilling rigs and a related oil field
services company operating under the name Lariat Services, Inc.; gas gathering,
marketing and processing facilities, and, through its wholly owned subsidiary
PetroSource Energy Company, carbon dioxide (CO2) treating and transportation
facilities and tertiary
oil recovery operations. The Company is focused on
exploration and exploitation of its significant holdings in West Texas that it
refers to as the West Texas Overthrust (WTO), a natural gas prone geological
region that includes the Pinon Field, and its South Sabino and Big Canyon
prospects. SandRidge operates in four segments: exploration and production,
drilling and oil field services, midstream gas services and other.

Breakdown trigger: $60 *** New trigger ***

Buy 2010 $70 LEAP LWE-AN

*******************

TRN - Trinity Industries

I know what you are thinking. Why a rail car manufacturer when there are 40,000
cars in storage at present? Because Trinity is rapidly remaking itself into a
wind tower company. Last quarter the CEO said his wind business increased 42%
and the backlog went from $200 million to $1.6 billion. They have many
manufacturing lines and segments and when one is slack it can pick up for the
other. I think the wind tower business is going to continue to explode.

Company Info:

Trinity Industries, Inc. (Trinity) is a multi-industry company that owns a range
businesses, which provide products and services to the industrial, energy,
transportation and construction sectors. Trinity has five business groups: Rail
Group, Railcar Leasing and Management Services Group, Construction Products
Group, Inland Barge Group and the Energy Equipment Group. The Company
manufactures and sells railcars and railcar parts, inland barges, concrete and
aggregates, highway products,
beams and girders used in highway construction,
tank containers, a range of steel parts, and structural wind towers. In
addition, it leases railcars to its customers through a captive leasing
business, Trinity Industries Leasing Company. In April 2007, its subsidiary,
Transit Mix Concrete & Materials Company, acquired a combined group of East
Texas asphalt, ready mix concrete and aggregates businesses operating under the
name Armor Materials.

Breakout trigger: $41

Buy 2010 $50 LEAP Call YJS-AJ

Breakdown trigger: $35

Buy 2010 $40 LEAP Call YJS-AH

****************

GDP - Goodrich Petroleum

This company is primed to explode. It quietly collected a huge acreage position
in the Haynesville Shale natural gas field before it was widely known as a
monster discovery. Last Monday Chesapeake agreed to pay Goodrich $178 million
for a 50% ownership in a portion of the acreage. Chesapeake is planning on
drilling 440 horizontal gas wells on the property. This is a monster win for
Goodrich and it has been somewhat of a secret until last Monday.

Company Info:

Goodrich Petroleum Corporation is an independent oil and gas company engaged in
the exploration, exploitation, development and production of oil and natural gas
properties primarily in the Cotton Valley trend of East Texas and Northwest
Louisiana. As of December 31, 2007, the Company owned working interests in 301
active oil and gas wells located in 26 fields in five states. At December 31,
2007, Goodrich had estimated proved reserves of approximately 346.9 billion
cubic feet (Bcf)
of natural gas and 1.8 million barrels (MMBbls) of oil and
condensate, or an aggregate of 357.8 billion cubic feet equivalent (Bcfe). On
March 20, 2007, the Company completed the sale of substantially all of its
assets in South Louisiana to a private company. The remaining fields held for
sale are St. Gabriel, Bayou Bouillon and Plumb Bob. During the year ended
December 31, 2007, Goodrich acquired drilling and development rights to acreage
located in the Angelina River play.

Breakdown trigger: $55

Buy 2010 $70 LEAP Call LP-AN

Breakout trigger: $66

Buy 2010 $80 LEAP Call LP-AP

******************

HK - Petrohawk Energy

Petrohawk has been in the news a lot last week based on their Haynesville Shale
acreage. They are making a career out of drilling horizontal wells in the
Haynesville.

Company Info:

Petrohawk Energy Corporation (Petrohawk) is an independent oil and natural gas
company engaged in the acquisition, development, production and exploration of
oil and natural gas properties located onshore in North America. The Companys
properties are primarily located in the Mid-Continent region, including North
Louisiana, the Fayetteville Shale in the Arkoma basin of Arkansas and in the
Western region, including the Permian Basin of West Texas and southeastern New
Mexico. At December
31, 2007, the Companys estimated total proved oil and
natural gas reserves were approximately 1,062 billion cubic feet of natural gas
equivalent, consisting of 18 million barrels of oil, and 955 billion cubic feet
of natural gas and natural gas liquids.

Breakout trigger: $40.75

Buy DEC $50 Call HK-LJ

Breakdown trigger: $36

Buy DEC $45 Call HK-LI

******************

CHK - Chesapeake Energy

This is another stock that refuses to pull back but the news is too good to let
it continue to run away from us. As I mentioned in the GDP lead CHK paid $178
million to Goodrich for a 50% working interest in some Haynesville Shale
acreage. As I read further CHK said the Haynesville Shale could end up being the
biggest asset they own and produce more gas than any other CHK property. That is
a huge statement given CHK's massive footprint in places like the Barnett Shale
in the DFW area.
Encana (ECA) is the largest gas producer in North America and
they said the Haynesville Shale could be the biggest deposit in North America.

Company info:

Chesapeake Energy Corporation is a producer of natural gas in the United States
(first among independents). It owns interests in approximately 38,500 producing
oil and natural gas wells that are producing approximately 2.2 billion cubic
feet equivalent (bcfe), per day, 92% of which is natural gas. Its operations are
located in the Mid-Continent region, which includes Oklahoma, Arkansas,
southwestern Kansas and the Texas Panhandle; the Forth Worth Basin in
north-central Texas; the Appalachian
Basin, principally in West Virginia,
eastern Kentucky, eastern Ohio and southern New York; the Permian and Delaware
Basins of West Texas and eastern New Mexico; the Ark-La-Tex area of East Texas
and northern Louisiana, and the South Texas and Texas Gulf Coast regions. In
July 2007, the Company announced the acquisition of Kerr-McGee Tower from
Anadarko Petroleum Corporation and subsequent sale of the tower to SandRidge
Energy, Inc.

Breakout trigger: $67

Buy 2010 $80 LEAP Call WZY-AP

Breakdown trigger: $60

Buy 2010 $70 LEAP Call WZY-AN

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